The Conservative Party is facing an unprecedented identity crisis. Andrew Grice looks at where it all went wrong and considers how the party can reverse its fortunes

The Conservatives’ perilous state was illustrated when some party figures were privately relieved the exit poll on Thursday night gave them just 131 MPs. “I’ll take that,” one MP said.

Some opinion polls had put the Tories a humiliating third place behind the Liberal Democrats. Their worst result in history could have been even worse. The relief will not last long, once the scale of the defeat sinks in.

Nigel Farage, whose Reform UK inflicted huge damage on the Tories, hailed the election result as “the beginning of the end” for them. The Tories are certainly on life support; whether they can revive is in their own hands. It’s a long road back to health, and there is every chance they will take a wrong turn: should they stick to a centrist approach or veer right to become a small-state, low-tax, low-regulation party, committed to a tougher line on immigration and “wokery,” abolishing the net zero target and withdrawing from the European Convention on Human Rights?

The Tories’ post-Brexit identity crisis is the biggest in their 180-year history. Do they favour the free market or Boris Johnson-style interventionism? A small state or a big one? Do they believe in the welfare state or want to demolish it? Do they celebrate immigration or hate it? Should the UK play a positive role on the global stage, or retreat into a Little Englander comfort zone?

Another way of looking at it is whether the Tories favour an “open” or “closed” approach to the economy. This dividing line was first sketched by Tony Blair, who diagnosed that globalisation and new technology were erasing the traditional left/right divide. Labour now has a chance to become an “open” party if it lives up to the pro-business rhetoric of Keir Starmer and Rachel Reeves. It might help it supplant the Tories as the natural party of government. A lot of Tories will instinctively favour “closed.”

Johnson masked these dilemmas. He was a big state tax-raiser because the pro-Brexit voters in the North and Midlands he won over at the 2019 election were left of centre on the economy. After wasting a golden opportunity to redraw the political map by making “levelling up” work, the Tories must now decide whether to try to reforge Johnson’s 2019 coalition or build back from their traditional blue wall in the South.

The highly symbolic defeat of Liz Truss in her Norfolk seat should persuade the Tories to finally bury Trussonomics and populism. But there is little sign the party’s grassroots regret installing her as leader. The party should now allow MPs alone to choose the leader, at the very least when the party is in government, to prevent a repeat of the Truss fiasco. But any such moves are bound to be resisted by the members.

Some Tories believe the party could split amid the post-election battle, with One Nation Tories walking out to form a breakaway party if the new leader cosies up to Farage or adopts his agenda. Yet I think this unlikely; the election reminds us the first-past-the-post electoral system is cruel to small parties. For now, the mood is to stay and fight because the Tories are still the best party in town.

Farage will influence the Tories’ agonised debate, the joker in the wings. Jacob Rees-Mogg, one of the many Tory casualties, said in public what a lot of Tories think privately: that “there are two very big charismatic figures” on the right – Farage and Johnson. Some Tories dream of a deal between them to “unite the right” but they could never be the two amigos, only the two giant egos. I don’t discount a return for Johnson as leader one day; many Tories are convinced he would have done better on Thursday than Rishi Sunak.

We should not assume Sunak’s successor leads the party into the 2029 election. As one centrist told me: “I think we’ll have a Truss Mk II leader who will crash and burn and then we’ll come to our senses.”

The Tories shouldn’t rush their contest; when parties make a knee-jerk response to a defeat, they make mistakes. Labour opted for its comfort blanket in 2015 by electing Jeremy Corbyn. The Tories were right to play it long in 2005, which meant they got David Cameron, a centrist who led them back to power.

If the Tories continue to fight among themselves, they will look irrelevant. They should learn from Starmer, who revived Labour’s fortunes only when his party stopped looking inwards and looked outwards to the public.

Starmer benefited from an increasingly volatile electorate. But what voters give, they can take away. So I don’t think Labour’s huge majority guarantees Starmer the decade he wants in Downing Street. He will need to earn it.

That volatility should give the Tories a ray of hope on their dismal weekend. If they fight Labour from the centre rather than the populist right, the pendulum will swing again and the oldest and most successful party in Western democracies will be back.